Correlation Between Ford and CLEARWATER

Can any of the company-specific risk be diversified away by investing in both Ford and CLEARWATER at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ford and CLEARWATER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and CLEARWATER PAPER P, you can compare the effects of market volatilities on Ford and CLEARWATER and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ford with a short position of CLEARWATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and CLEARWATER.

Diversification Opportunities for Ford and CLEARWATER

0.24

Correlation Coefficient

Ford  CLEARWATER

Modest diversification

The 3 months correlation between Ford and CLEARWATER is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CLEARWATER PAPER P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEARWATER PAPER P and Ford is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ford Motor are associated (or correlated) with CLEARWATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEARWATER PAPER P has no effect on the direction of Ford i.e., Ford and CLEARWATER go up and down completely randomly.

Pair Corralation between Ford and CLEARWATER

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the CLEARWATER. In addition to that, Ford is 4.05 times more volatile than CLEARWATER PAPER P. It trades about -0.02 of its total potential returns per unit of risk. CLEARWATER PAPER P is currently generating about -0.08 per unit of volatility. If you would invest  9,342  in CLEARWATER PAPER P on September 15, 2024 and sell it today you would lose (404.00) from holding CLEARWATER PAPER P or give up 4.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.43%
Values	Daily Returns

Ford Motor  vs.  CLEARWATER PAPER P

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

CLEARWATER PAPER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLEARWATER PAPER P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CLEARWATER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and CLEARWATER

The main advantage of trading using opposite Ford and CLEARWATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, CLEARWATER can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CLEARWATER will offset losses from the drop in CLEARWATER's long position.

The idea behind Ford Motor and CLEARWATER PAPER P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.